Government to reassess the inversion duty structure to minimize CAD: MRAI

 
Metal Recycling Association of India ( MRAI ) is a National Association representing the interest of India’s Metal Recycling Industry with over 10,000 Direct and Indirect Members Providing Employment to 18 lacs people in India.

 
Aluminium Scrap is the key raw material of Aluminium Recycling Industry. At present majority aluminium scrap which is a key source of secondary aluminium processing as well as automobile industry is being mainly imported due to unavailability of quality scrap in India. India doesn’t generate enough aluminium scrap, the demand for the same has to be met by imported scrap till we generate enough resources of scrap domestically.

 
Since last many years, there was no import duty on the aluminium metal scrap but as per the Notification No,25/2013 dated 8th May 201, 2.5 per cent import duties have been levied on the environment friendly scrap metal as a basic custom duty as stated by MRAI. The usage of metal scrap is actively promoted by several developed countries like Germany, Sweden, Finland, Russia, Australia, China and the USA.

 
MRAI urged the Government to consider the reduction of Customs Duty on Aluminium Scrap from 2.50 to Nil because of the tough competition mainly on account FTA’s with Asian Countries, Aluminium Alloy and Deox is being imported at Nil Duty while aluminium scrap is being imported at 2.5 per cent.

 
We would also like to draw the government attention on a significant anomaly in India’s policy, which is hurting the aluminium recycling metal industry. It is the case of inverted duty structure, wherein raw material (scrap) imports is being allowed into the country at basic duties of 2.5 per cent. However finished and semi-finished products from overseas are allowed duty free in the country under FTAs. There is a clear case of inversion, which needs to be immediately corrected.

 
Such high tax on the raw materials compels them to raise price. In conclusion, secondary aluminium which is a key raw-material by the domestic secondary aluminium industrybecomes non-competitive against imported Aluminium finished goods.

 
In contrast, India’s Primary Aluminium Producers has recommended the Government to increase the scrap import duty from 2.5 per cent to 10 per cent on account of rising import to curb the current account of deficit.The primary producer’s pricing mechanism includes the price of their product by adding the customs duty on their basic value which clearly indicates the intention for increase of custom duty is to get more price from the Indian MSME downstream ancillary units.Actually, a large part of the problem is due to the various trade agreements India has signed with other countries, which is also pushing up imports and thereby widening the trade deficit.

 
In this connection, MRAI would like to clarify that rising import of scrap is largely due to increase in demand from Automobile sector. Hence, Government should remove the import duty on scrap while rest of world there is zero import duty levied on aluminium scrap material. Such imposition of additional duty will have an adverse impact on the small and medium players of the sector who make products such as alloys by recycling as it will shoot up their input cost.

 
First of all the Aluminium Scrap is not the substitute for the Primary Aluminium as both are used in Different Industries. Primary Aluminium is used in Electricals, Foils, Powder, Extrusion etc whereas the Aluminium Scrap is mainly used in Alloy Ingots which are further used in the Automobiles Industry and Deox which are used in Steel Plant for Deoxidation.

 
Overall, it is directly impacting around 5,000 MSME’s andit’sdownstream secondary aluminiumunits. Overall, these units contributing to 50 percentof total aluminium product through recycling route.This will lead to poor performance of SME’s and MSME’s Working in this Sector and leading to Unemployment.

 
During last 2 to 3 Years, Exports of FTA’s of Aluminium Alloy from Asean Countries had increased a lotto approximately 1.2 million tone due to boom in the automobile industry. Of the total domestic demand of aluminium scrap, India isgenerating just 20 per cent of the aluminium scrap from the domestic source as compared to 2.5-2.8 per cent lower capita consumption which is less than the world average is at around 25 per cent.If the government reduces the import duty, Exports from FTA will reduce significantly will help to minimize CAD and also save 20% of the value addition dollars and it will generate additional employment and other revenues.

 
To conclude,MRAI urged the Government should consider to remove the import duty of aluminium scrap. This will help the SME’s and MSME’s heavily depending on Aluminium scrap to work with full efficiency and avoid unemployment.Globally every country is promoting usage of recycled metals as it preserves natural resources and provides sustainable development to the economy, and has extremely low emissions compared to primary production. In addition to this, Metal Recycling Industry truly is an adaptation of our Prime Minister’s dream Project of “SWACHH BHARAT” as well as “MAKE IN INDIA” Campaign.By Supporting Recycling Industry there will be huge revenue generation to the Government of India in terms of direct and indirect tax collections.

 
For any further assistance :Pramod Shinde, +91 9930629739